Demand for tokenized versions of US Treasuries is skyrocketing as rising yields in traditional financial markets attract new capital from crypto investors.
The combined market capitalization of token money funds is approaching $500 million and has quadrupled this year, according to data compiled by CoinDesk.
Money market funds are traditional investment products that hold short-term government securities and offer a relatively safe way to earn a return. Investors flocked to these funds for their perceived security against failing banks and their offer of 4-5% interest rates over bank deposits.
High government bond yields have also captivated digital asset investors discouraged by low lending rates and bankruptcies over the past year. Therefore, a large number of platforms have found a way to offer access to it on the blockchain in the form of a token.
The first and largest offering, investment giant Franklin Templeton’s Franklin OnChain US Government Money Fund (FOBXX) – which gives away a BENJI token on the Stellar blockchain representing one stock – reached $276 million in assets at the end of april. This is almost triple the early January deposits represented by the BENJI token offering, according to blockchain data.
New challengers are rapidly catching up their market share. Ondo Finance’s OUSG and Matrixdock’s SBTB tokenized products, both open to investors in January and each backed by short-term government bonds, have so far raised $132m and $72m, respectively. dollars of funds, according to Dune Analytics.
Recent entrants have also seen substantial inflows. Swiss firm Backed Asset’s short-term government bond fund (bIB01) now has $4.6 million in assets under management since its March exit, according to Etherscan.
Singapore-based OpenEden, a platform that allows USDC stablecoin holders to invest in a vault of Treasury bonds by minting yield-generating TBILL tokens, has already earned 4.8 million dollars in deposits in two months, according to data from Dune.
The tokenization of real-world assets such as government bonds has become one of the hottest trends in crypto this year. Banking giant JPMorgan called it a killer application for blockchain, while Bank of America said it was a key driver for digital asset adoption.
Tokenized money market funds are particularly in demand by those who hold large amounts of stablecoins, a tokenized version of US dollar cash. These include digital asset investment funds, crypto companies, and Decentralized Autonomous Organization (DAO) treasuries, OpenEden co-founder Eugene Ng said in an interview.
Fund investors are taking an increasingly sophisticated approach to on-chain cash management, Justin Schmidt, president and chief operating officer of Ondo Finance, said in a note. “A low-risk asset that pays a significant return in token form can be an attractive option for CFOs [chief financial officers] as they position their treasury operations for success.
The fact that established players are also entering the space, merging blockchain technology with traditional finance, is also fueling growth, according to Doug Schwenk, managing director of Digital Asset Research, a research and crypto data provider for clients. institutional.
“Brands like Franklin Templeton and Ondo Finance bring more confidence to an asset that would be viewed with more skepticism,” Schwenk said.